We know a bailout is when the government bails the banks out by giving them money when they get into trouble. So what is a bail-in? And how can it pose a real and present danger to your hard-earned savings?
U.S. taxpayers provided capital, via their government, to many major U.S. banks during the economic downturn in order to help them meet their debt payments and remain in business, as opposed to being liquidated to creditors. That was the BAIL OUT. According to The Economist, the magazine that coined the term, a BAIL-IN occurs when the borrower’s creditors are forced to bear some of the burden by having a portion of their debt written off. For example, bondholders in Cyprus banks and depositors with more than 100,000 euros in their accounts were forced to write-off a portion of their holdings. (In other words, it was stolen from them by their banks.)
Jim Sinclair, chairman and chief executive officer of Tanzania Royalty Exploration Corp., and whose family started Goldman Sachs, Salomon Brothers, Lehman Brothers, and others, has been warning of this for a while: “Bail-ins are coming to North America without any doubt, and will be remembered as the ‘Great Leveling,’ of the ‘great Flushing’. Not only can it happen here, but it will happen here…It stands on legal grounds by legal precedent both in the US, Canada and the UK.”
On November 16, leaders of the G20 Group of Nations – the 20 largest economies – made an important decision. The world’s megabanks now have official permission to pledge depositor accounts as collateral to make leveraged derivative bets. And if they lose a bet, the counterparty to the contract has first dibs on your money.
In Stockholm Sweden, Vice Chairman of the Federal Reserve and former governor of the Bank of Israel and former chief economist at the World Bank, Stanley Fisher noted: “As part of this approach, the United States is preparing a proposal to require systemically important banks to issue bail-inable long-term debt that will enable insolvent banks to recapitalize themselves in resolution without calling on government funding–this cushion is known as a ‘gone concern’ buffer.”
What to do? You could diversify, by having your savings in different banks and credit unions / savings and loans, but what if hyperinflation hits? You could still lose it! One suggestion is to turn your saved money into REAL money. Paper money is simply a substitute for real money, which is gold.
By moving your money into gold, you know the value of your money will be maintained, and you are surely not dumb enough to leave your gold in a bank. Every paper currency in history has failed, and gold has a 5,000 history of never failing. Keep a cash cushion and enough operating capital / living money available, but instead of buying government bonds and paper stocks, this is another option.
Does Your Spouse Say THIS?
Robin Elliott LeverageAdvantage.com